Contortionist Compomises

SUBHEAD: Contorted, convoluted, con artists. They're gutting our futures, and those of our children.

 By Ilargi on 22 July 2011 for the Automatic Earth -

Image above: Battle of Zama (202 bc) in which Scipio Africanus, of Rome, defeated Hannibal, of Carthage. Painted by Giulio Romano (c. 1521).From (

 It's often hard to define with precision when the beginning of an end is reached. In many instances, and certainly in the case of the Euro and its zone, it's really inconsequential. The only thing that truly counts is that after yesterday's contortionist €159 billion Greek bail-out 2.0, there is no way back to a healthy currency, or an economically viable region to use it in, for that matter. But the markets are up, you say!

Yes, of course they are, because they were just handed access, in the form of a "reformed" European Financial Stability Facility (EFSF) to potentially trillions of euros worth of European taxpayers' money. And even though they're well aware that it's all just temporary, for today - and maybe tomorrow- their profits are guaranteed.

So of course they're up. For now.

There's no serious investor, however, who’ll dive in for the long, or even the medium, term. The message that emanates from the hastily broken vows and neglected solemn pledges by the major players in Europe does nothing to restore confidence in either Greece, Ireland or Portugal. In fact, it does the exact opposite. If there had been any chance at all that Greece could have paid off its debts, the terms of the present deal would not be what they are. What it all spells, going forward, is increasing volatility. Which suits the most savvy players just fine, thank you. Europe is, of -financial- necessity, sliding towards a fiscal and subsequent political union (and yesterday was a big step).

A union that has zero chance of being accepted by its members. That is how we recognize that this is the beginning of the end. Without the extended powers of the EFSF, an outright Greek default would have been unavoidable. With the revamped facility, there can be a few more months (or is it even just weeks?) of pretending. And then, German, Dutch and/or Finnish voters will hammer it down. It's still nothing but the same old same old: a severe bout of insolvency that is being treated as if it were as simple case of illiquidity. All bail-outs on both sides of the Atlantic carry this signature.

And for good reason: they deal with bankrupt entities, banks in the one instance, countries in the other. Whatever the differences may be, that common feature trumps them all. The markets -represented where the PIIGS are concerned by the bond vigilantes- are kept satisfied for a vanishingly fleeting moment, and everyone prays the quiet will last. But then it never does. The PIIGS are bankrupt. They will never be able to pay back their debts, and it makes little difference whether these are public or private.

There's so much blood in the -Mediterranean- waters (and the Irish Sea) that the sharks are certain to remain where they are, restlessly swimming. There's simply too much money to be made. The changes to the EFSF are presented by the big kahunas as tokens of strength and solidarity. But they're just a charade. Everybody knows the truth; at least everybody who plays at the big kahuna table, while the ones who don't know are forced to pick up the bill. After all, as Simon Jenkins writes in the Guardian: 

"Power always wins, so long as it can get someone else to pay".

The US has its own contorted compromise. Bernie Saunders, Senator for Vermont, writes:  
The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. 
Not even the EFSF will get that far anytime soon. we may presume. It's somewhat funny that both sides of Congress and the Senate, as well as the White House, have now spent months rolling over the floors, jockeying for election position in the debate over the debt ceiling. Which, though incomprehensibly large as it already is supposed to become, is nevertheless still smaller than just the secret loans the Federal Reserve has handed out over the past few years alone.

Contorted, convoluted, con artists. They're gutting our futures, and those of our children. We elected -most of- these fine folk. And it's up to us to get rid of them.


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